Norway's oil fund will on Monday be officially rebuked for violating OECD guidelines over its investment in South Korean steel maker Posco, in an embarrassment for the world's largest sovereign wealth fund.
In a sign of the growing scrutiny the Norwegian government-backed fund is facing, the local contact point for the OECD guidelines on multinational enterprises will conclude that it "lacks a strategy for identifying and handling possible violations of human rights in the company [it] invests [in]".
The case stems from the oil fund's stake of about 0.9 per cent in Posco, which is constructing a steel plant in India that some non-governmental organizations claim will displace 20,000 local people.
"It is especially regrettable that the governmental manager of the [oil fund], and one of the biggest investors in the world, does not respect the guidelines which Norway has signed," said Hans Petter Graver, chairman of the Norwegian contact point for the OECD guidelines, and a professor of law.
Norges Bank Investment Management (NBIM), the manager of the oil fund, said in a statement released before the ruling it believed the claim should have been rejected and added that it does not think the guidelines apply to it.
"In our view, the guidelines apply to the companies Norges Bank invests in, their business operations and subcontractors, but not to Norges Bank as a minority investor," it said. It added that there was no direct link between its role as an investor and the potential negative impact caused by Posco.
But the finding that it violated the guidelines adds to the increasingly intense local scrutiny the $750-billion (U.S.) fund is subjected to. Yngve Slyngstad, head of the oil fund, was on Friday forced to reveal how it voted at the AGM of JPMorgan Chase & Co. on the question of whether to split Jamie Dimon's role as chief executive and chairman.
Revealing that it backed the split, Mr Slyngstad argued that it had already disclosed it voted in a similar manner at JPMorgan's AGM last year in its annual disclosure of how it voted at every company it invests in, released in March.
The oil fund is transparent on some issues – revealing each year exactly how much of every company and bond it owns as well as its voting history – but it otherwise refuses to talk about individual companies. Some critics in Norway say it should be more open about its investments as well as trying to use its clout to change companies' behaviour.
The oil fund is not the only investor facing scrutiny over Posco: Dutch pension fund ABP/APG agreed in March to co-operate with its local OECD contact point and engage with the steel maker over the issue.
The Norwegian contact point accused the oil fund of not responding to its questions but NBIM noted it had met the OECD body to discuss responsible ownership. The oil fund also argued that the Norwegian contact point should have awaited the ruling of its South Korean counterpart over Posco's conduct.